This Tax System is Killing Us

by Reza Fiyouzat on May 3, 2017

These days, everywhere we look we see signs that the budgeting and taxation system, as well as the tax reforms in the works, are intended to increase social destitution and shorten our lifespan by as much as possible.

As an example, the U.S. Congress intends to make it more difficult for people to save for a half-decent retirement. On April 21, The Wall Street Journal reported that Congress plans to revoke selected tax benefits attached to some retirement accounts. This miserly sneak attack on people’s ability to save for retirement is one example of many cuts in benefits in the Trump/GOP budget to make room, as announced on April 26, for the huge tax breaks for the corporations and the top income earners.

The cuts in benefits obviously fall almost entirely on the poor and the working and middle classes, as well as government agencies or programs that advance the collective well being of the American people. As reported widely, the current U.S. Congress and the White House plan to cut 31% of the funds for EPA just as the administration has relaxed emissions standards for power plants and reduced fuel efficiency standards for cars; the budget would also cut EPA programs that deal with climate change and pollution, and as reported by Bloomberg, “The Trump administration is proposing to slash funding for grants to prevent lead poisoning, climate change research and criminal enforcement against polluters as part of its plan to reduce funding.”

The proposed budget outlines also intend to cut the budget of the National Institutes of Health, and NASA’s budget for Earth science. The cuts to the NASA budget are not huge, but the targeting is telling: as Washington Post reported, “The total cut to [NASA’s] Earth-science budget is $102 million, or 5 percent of the program’s annual budget, and it almost exclusively targets missions aimed at understanding climate change.”

It is obvious that they don’t even want us to know what’s happening with the planet’s climate, a most basic physical precondition for our survival. In this social reality, dystopian novels will have to resort to a lot more extreme plotlines to deliver their shocking realizations.

Further, the Trump administration and the GOP-controlled Congress have talked about cutting ‘Meals on Wheals’; they want to cut Social Security benefits anyway they can; they plan to cut the number of people receiving healthcare by cutting Medicare and Medicaid benefits and repealing Affordable Care Act; they have announced plans to cut free meals for poor children in public schools and to cut billions from Food Stamps (SNAP). The budget proposals would cut funds to Agriculture Department (by 21%), Labor Dept. (21%), Dept. of Health and Human Services (18%), Education Dept. (14%), Dept. of Housing and Urban Development (13%), just to name a few.

Besides providing funds to counter the tax cuts for the corporations and the super rich, these cuts in benefits are also intended to make room for the increase in the Defense budget by $54 billion, a 9% increase. Additionally, as reported by CNN, “The White House has also submitted a supplemental request to Congress for an additional $30 billion in defense funding for the rest of 2017,” (emphasis added).

It is important to note that a significant portion of the defense budget constitutes a gigantic transfer of wealth from the taxpayers to a handful of military contractors such as Raytheon, Northrop Grumman, Lockheed Martin, and Boeing. According to the Business Insider, just the top nine military contractors received almost $100 billion (about one sixth of the Defense budget) worth of contracts, in 2015.

Healthcare

Currently, there are 28.5 million uninsured Americans, according to data from Kaiser Family Foundation. The uninsured numbers are bad enough. However, most of the insured people are under-insured significantly, a situation that the Affordable Care Act did not fix, nor address.

Of those with insurance, only a small percent are fully covered for whatever illness they may encounter in the future. We can easily guess who those lucky ones are that have 100% coverage for whatever the good Lord may throw at them and their progeny for generations to come.

Most of the regular people’s policies, however, come with premiums that are pretty high for the income levels of most Americans, and have even less affordable deductibles. The healthcare insurance system afflicting a majority of Americans is the same as having to choose from a menu of diseases and hoping and praying that no uncovered diseases will befall us. The ailments and diseases not fully covered are likely the highly costly ones to treat, which is why they require high deductibles. This is an absurd and cruel system, but our right wing leaders say we should not even have that because it covers too many people for too many things.

In 2009, a study conducted at Harvard Medical School and Cambridge Health Alliance reported an annual rate of almost 45,000 deaths due to lack of health insurance. Are these the kinds of targets for population control the current administration is seeking to revive?

The ruling class obviously doesn’t want us to be healthy and thriving. The basic social contract, as the millions of uninsured people realize, is that if you get really sick, just die. If you’re a relative of somebody who has died of being uninsured or under-insured, don’t look to your political representatives for solutions; your loved ones’ death is their solution.

If our tax and budgeting systems were set up differently, our healthcare system could have been fixed a long time ago.

Education

Our government leaders have likewise no solution for another issue related to a fundamental aspect of living in a society: Public Education. From the way public education is presently funded through property taxes, to the racial and class divides in our public schools, to the way the available funds are allowed to be diverted to privately-run Charter Schools with no accountability, the American education system today is in such disrepair that Jonathan Kozol has characterized it as, “restoration of apartheid schooling in America,” (see, The Shame of the Nation: The Restoration of Apartheid Schooling in America).

For Kozol a milestone in the entrenchment of the current inequities in our education financing goes back to a 1973 Supreme Court 5-4 decision that overruled a lower court decision issued in 1971, in which, “a three-judge federal district court in San Antonio held that Texas was in violation of the equal protection clause of the U.S. Constitution,” (p. 241). The class action suit had been filed by some San Antonio residents to demand educational equity for their children attending the city’s Edgewood district schools, “which was very poor and 96 percent nonwhite.”

As Kozol explains, Edgewood residents paid a high property tax rate, in percentage points, but the district could not raise enough for educational purposes due to the low value of property in the district. “Even with assistance granted by the state, Edgewood ended up with only $231 for each child. Alamo Heights, meanwhile, the richest section of the city … was able to spend $543 on each pupil. Alamo Height, then as now, was a predominantly white district,” (p. 241-242). The class action suit by Rodriguez and other parents sought to remedy this inequity in access to education funding, based purely on the pupils’ residential location.

In overturning the San Antonio federal district court’s ruling, by merely one vote, the United States Supreme Court set a precedent that to this day has stymied efforts at both local/state and federal levels to remedy this egregious inequity in education.

Kozol points out that when per-student funding gap is multiplied by the total number of students in a school, the gap in funding for resources, teachers, for facility upkeep, etc. becomes even more clearly pronounced. For example, “A high-poverty elementary school that holds about 400 students in New York receives more than $1 million less per year than schools of the same size in districts with the fewest numbers of poor children,” (p. 246). Over the decades, this funding gap grows deeper: over my lifespan, the high-poverty elementary school in the New York example has received nearly $60 million less in funds to acquire resources, to hire qualified teachers and staff, to pay custodians, to pay for upkeep, for repairs, for labs, playgrounds, books and libraries, and for changing the water pipes so they don’t release lead into the kids’ drinking water.

One has to wonder: Is the deep inequality in the U.S. education system an unfortunate and accidental byproduct of the funding mechanism, local property taxes plus supplementary state and federal funds; a funding system that started in mid-1600s as a means to fund local schools in the colonial times? Or, is it the case that this particular funding mechanism is deliberately kept in place in order to reproduce deep inequality in the education system, which in turn provides one necessary condition for reproducing inequality within the society at large?

Here again, if the taxation-and-allocation system that funds education were different, our education system would not be in a state of apartheid.

Useless Democrats

One thing is clear: Democrats are not going to help us. Some decades ago, they got demoted to the post of bouncers at the social club — the Congress and the overall political field, including the corporate media — that makes crucial budgeting decisions and informs the public about it.

One way to look at budgets and taxation is to look at the split between the military and non-military portions of the budget. In this regard, Dennis S. Ippolito’s book, Why Budgets Matter: Budget Policy and American Politics, provides a concise summary of the budgetary fluctuations from the founding of the U.S. until 2010s.

As told by Ippolito, Johnson presidency, “Initiated the most important changes in federal social welfare policies and commitments since the New Deal,” (p. 196). Since the U.S. Congress at the time was about two-thirds Democrat to one-third Republican, they could have legislated whatever they wished. Under enormous social pressures from the various social movements at the time, the dominant part of the ruling bloc used its legislative means to pass significant social benefits to appease their constituents and calm the social storms that were brewing. Hence the huge increases in budgetary allocations for social spending.

Once Reagan took over the presidency and the right turn set in, the military budget received a big boost. At the same time, although he tried hard, Reagan could not reduce the non-military portion of the budget due to congressional opposition. These two factors, coupled with Reagan’s tax cuts, meant that budget deficits, which had become necessary to provide for the increased social spending in the previous decades, continued to grow.

It was left to the New Democrat Bill Clinton in the 1990s to balance the budget. To balance the budget the military budget was cut consistently in the 1990s, which was possible due to the collapse of the Soviet Union and the Socialist Bloc. Significantly, there were also cuts to the welfare benefits, which introduced a new turn for the democrats. The cuts to the welfare budget were not as large as the military cuts of the 1990s, of course, but the important factor was the symbolic break with the concept of welfare that had given the Democrats their legitimacy (in the eyes of their base) ever since FDR’s presidency. At the same time, the ‘balanced budget’ mantra that had historically been the Republicans’ creed was now taken up by Democrats.

Direct Representation for Taxation

Since the presidency of George W. Bush, the military budget has gone on steroids. That, coupled with Bush’s tax cuts for the top earners, and the addition of the new facade of ‘War on Terror’, which introduced a whole new way of doing geo-politics abroad and spending at home, have brought us to a new era of budgeting philosophy.

The underpinnings of this new era have meant a deep and almost stealth erosion of individual rights, as exemplified by disappearance of habeas corpus, in the name of ‘security’. This naturally necessitates all manner of social resources being channeled into providing the said security, at the expense of everything else; most certainly at the expense of social services. Finally, with the financial crash of the 2008 and its aftermath, a new layer of misery was added to the already dismal picture.

Human societies are dynamic organisms however and we do react. There are social movements building up spontaneously all around us. Things are such that people are taking to the streets to defend science! But if this resistance to the current far right agenda does not find a clearer focus and, more importantly, a positive program of its own, it can wither away, or disappear into the Democratic Party. The current spontaneously developing movements must create their own institutions in order to thrive.

One platform item this movement must address at some point is the question of taxation and budgeting. The practical and programmatic left must take account of a long list of social needs that require resources, no matter what kind of society we live in. Health and education are obvious examples, and there are numerous others. So, how do we propose to provide funding and resources for those social needs?

Historically, the debate over taxation has focused purely on the question, “Who pays how much?” But, we have never considered changing the question to, “Who should decide how our taxes are spent?”

It is becoming clearer every day that members of the U.S. Congress do not feel the slightest obligation toward the ordinary citizens’ well being. Our basic needs are increasingly irrelevant. Our congressional representatives are too focused on giving tax breaks to the super rich, enriching themselves, cutting the benefits we get from all the taxes we pay, and spending disproportionate amounts of our money on security and defense-related concerns, thereby increasing the class divide and reducing our ability to organize socially.

So, maybe we the people should loudly raise the question, “Who should decide how our taxes are spent?” One possible answer is: Why don’t the taxpayers themselves decide directly how to spend the tax revenues? In other words, why not ‘direct representation for taxation’?

We now have the technical wherewithal to implement a tax system in which the political representatives determine the priorities for spending half of the taxes collected, while the aggregate and collective decisions of the taxpayers can directly allocate the other half.

In this scheme, as part of filing our taxes every year, we submit a list of priorities for spending. For example, I may tell the government to spend 15% of my taxes on public education, 20% on healthcare, 15% on environmental cleanup, 15% on food for low income children in public schools, 15% on community centers and neighborhood gardens, and so on.

Such a taxation system provides incentives for people to become more active locally to form Budgetary Unions, for example, through which they can get together to organize annual ‘tax drives’ to mobilize the community to fund local schools, hospitals or clinics, local playgrounds, after-school programs; or people can get together to pool funds for environmental cleanups in their communities, or even allocate money for strike funds for unorganized workers in their community struggling to unionize.

The Center on Budget and Policy Priorities reported that the corporate income taxes provided 11% of total taxes in 2015. Trump’s proposed tax plan would cut this share significantly. Where did the rest, 89% of the taxes, come from in 2015? From individual income taxes, which provided almost half of the total share of tax revenues (47%). Also, payroll taxes, split between workers and employers, covered another 33% of the tax revenues, with this proviso: “Research shows that employers pass their portion of the [Payroll tax] cost on to workers in the form of lower wages.” The remaining 9% came from excise, estate and other taxes.

Assuming those figures are fairly stable, about 80% of tax revenues come from income taxes paid by individuals. Why then do we allow the top one-percenters’ representatives in the U.S. Congress to make all the spending decisions about all of our tax money? Why should we leave it to them to dictate that the banks and the military can get all the trillions they want, but our schools and healthcare system, not to mention the crumbling infrastructure, are left to starve to death?

It’s way past time for people who actually provide the funds to take control of where the tax money goes. This form of direct democracy is a demand that is both realistic and can turn the tables on capital. In those states that allow ballot initiatives, this policy proposal can be put on ballots and put to a public debate, thereby radically changing people’s assumptions about budgeting and taxation. Across the nation, such a tax system can bring together all the disparate ‘single issue’ activists and the communities they advocate for. This is not a revolutionary proposal, of course, but one that can lead to conditions a few steps closer to revolutionary conditions. In that sense, it is not a ‘reformist’ move; it is not intended to ‘fix’ the system, but to shake it up while it expands the possibilities in our favor. And very importantly, it can be a huge positive boost of morale for a movement trying to find its way out of this hell; this proposal constitutes a move that dispels the deadly ‘There Is No Alternative’ myth.

In closing: It is not so much the case that we need to carry out a revolution first before we start to put all things right. It is more the case that in the course of trying to make all things right — in the course of fixing specific social problems collectively in our particular societies, and on a larger scale as a species — it is in that long-term effort that we realize we need a revolution to complete the task of putting things right.